Do Hedge Funds Love Northrop Grumman Corporation (NOC)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Northrop Grumman Corporation (NYSE:NOC).

Is Northrop Grumman Corporation (NYSE:NOC) a buy here? The best stock pickers were taking a pessimistic view. The number of long hedge fund positions went down by 13 in recent months. Northrop Grumman Corporation (NYSE:NOC) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that NOC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s go over the key hedge fund action encompassing Northrop Grumman Corporation (NYSE:NOC).

Donald Yacktman of Yacktman Asset Management

Do Hedge Funds Think NOC Is A Good Stock To Buy Now?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards NOC over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Yacktman Asset Management held the most valuable stake in Northrop Grumman Corporation (NYSE:NOC), which was worth $157.7 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $155.6 million worth of shares. D E Shaw, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Northrop Grumman Corporation (NYSE:NOC), around 22% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, setting aside 5.75 percent of its 13F equity portfolio to NOC.

Due to the fact that Northrop Grumman Corporation (NYSE:NOC) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Brandon Haley’s Holocene Advisors dropped the largest investment of the 750 funds watched by Insider Monkey, comprising an estimated $7.7 million in stock. Qing Li’s fund, Sciencast Management, also dropped its stock, about $4.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 13 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Northrop Grumman Corporation (NYSE:NOC) but similarly valued. We will take a look at NetEase, Inc (NASDAQ:NTES), Air Products & Chemicals, Inc. (NYSE:APD), Ford Motor Company (NYSE:F), ING Groep N.V. (NYSE:ING), Twilio Inc. (NYSE:TWLO), Emerson Electric Co. (NYSE:EMR), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD). This group of stocks’ market values are closest to NOC’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 47.7 hedge funds with bullish positions and the average amount invested in these stocks was $2711 million. That figure was $911 million in NOC’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 8 bullish hedge fund positions. Northrop Grumman Corporation (NYSE:NOC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NOC is 22.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately NOC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NOC investors were disappointed as the stock returned -2.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.